An In-Depth Overview Of Cost Segregation
Cost SegregationWHITE PAPERAn In-Depth Overview of Cost SegregationHelping Commercial Property Owners, Investors and Developers obtain a betterunderstanding of Cost Segregation Studies & its benefits.Prepared by:Christina J. Pearcy, Client Relationship ManagerCSG Strategic Tax ConsultantsCost Segregation StudyI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERAbstract:The purpose of this white paper is to help commercial real-estate owners, developers and investors obtaina better understanding of Cost Segregation Studies (CSS) and its benefits. The content of this white paperis aimed at owners of newly constructed, renovated, recently purchased or existing properties. In thefollowing document, I will discuss the definition and history of Cost Segregation; including Internal RevenueService (IRS) changes in the past and current laws and regulations, as well as recent developments. Next,I’ll list the benefits and who would take value from a CSS as well as describe how the study is performedand who should be performing it. Finally, I’ll provide examples of Cost Segregation Studies on differenttypes of properties and show their depreciation prior to a CSS and after a CSS.What is a Cost Segregation Study?Cost Segregation is a tax strategy used foraccelerating depreciation, reducing taxes andincreasing cash flow. A Cost Segregation Study isthe practice of identifying assets and their cost aseither real or personal property and reclassifyingthe property qualified for shorter “tax-lives” forfederal tax purposes. Typically, certain costswere previously classified to a 39-yeardepreciable life for non-residential real propertyand 27.5-year depreciable life for residential realproperty. With a CSS, they can instead beclassifiedaspersonalproperty,landimprovements, building components and land.After which they are then categorized into a 5, 7or 15-year rate of depreciation.This“engineering-based” study allows a buildingowner to depreciate new or existing structures inthe shortest amount of time permissible undercurrent tax laws. Cost Segregation has becomemore widely used by real estate investors overthe last several years. As a result, Congress andthe IRS have responded with various laws andrulings expanding further knowledge on thecomplexities of this topic.History of Cost Segregation:The laws, regulations and, procedures used inthis engineering-based cost segregation studyCost Segregation Studyhave been in existence since the enactment ofthe Investment Tax Credit (ITC) in 1962. Whenthe act was repealed in 1986, it was not clear ifcost segregation studies offered any benefitunder the new law, many assumed they didnot. However, in 1997, in a landmark tax courtcase (Hospital Corporation of America andSubsidiaries, v. Commissioner of InternalRevenue) Hospital Corporation of America (HCA)successfully defended the application ofengineering-based cost segregation as a viablemethod to differentiate real and personalproperty under the existing law. To this day, theHCA court case continues to be a pivotal point ofcost segregation studies ultimately making costsegregation practical for all qualified commercialproperty owners with new construction, existingproperty, recent acquisitions, renovations/improvements, green projects or 1031exchanges that occurred between 1987 present.As previously mentioned, the IRS and Congressconsequently have responded with various lawsand rulings to spur economic growth in the pastseveral years. These recent rulings can have amajor impact for building owners with previousconstruction and/or acquisitions.I C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERFollowing the tragedies of 9/11 in 2001, thegovernment allowed taxpayers to “catch-up” onall deductions from previous years for itemsreclassified into shorter rates of depreciation as aresult of a cost segregation study. Now it can beexpensed entirely in the year of change andreported as a reduction to the current year’staxable income. Prior to 9/11, the adjustmenthad to be spread out over the course of 4 years.In 2002 the IRS automatically consents tochanges in the method of depreciation via Form3115 (Change in Accounting Method) which isfiled with the return in the year the change iselected. This simplified the process of changingyour method of depreciation to account for a CSSwithout having an amended return.In 2004 the IRS reversed the two year waitingperiod required to change the method ofcalculation for depreciation on real-property,ultimately allowing the method of depreciationto be changed in any given year.The IRS has also issued comprehensive RepairRegulations regarding the deduction andcapitalization of expenses related to tangibleproperty. The regulations are applicable tobusinesses in all industries that acquire, produce,improve or replace tangible property (mostlyeveryone). Individuals who have incurredsubstantial cost for renovations to their existingproperty within the past 15 years are idealcandidates. These regulations are commonlyreferred to as Repair Regulations or the TangibleProperty Regulations, it mostly affects realproperty and can still provide significant benefitseven if a CSS has already been performed. Youcan apply these rules retroactively and claim anymissed deductions using Form 3115.Cost Segregation StudyBenefits of a CSS & Ideal Candidates:Taxpayers who have constructed, purchased,expanded or renovated commercial propertiesfrom 1987 till now and hold property with adepreciable basis of 750,000 or more can hugelybenefit from doing a CSS. A CSS allows for animmediate increase in cash flow, reduction incurrent tax liability, deferral of taxes and givesproperty owners the ability to reclaim misseddepreciation from prior years using the simplifiedForm 3115.If the asset is a good candidate for a costsegregation study, the benefit of reclassificationis usually very significant, reallocating between15 – 50% of assets depending on theindustry/building type as seen below in Figure 1.The greater the reclassification from real topersonal property, the greater the potentialbenefits will be.(Figure 1)I C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERAvg. 1st Yr.Savings / 1Million ofDepreciableProperty 10,000 11,000 20,000 8,000 7,500 6,000 10,000 9,000 7,000 7,500Average NPV SavingsBuilding TypeApartmentsAuto DealershipsHotelsOffice BuildingsOffice ParksHigh-Rise Office BuildingsShopping CentersFlex BuildingsOffice - WarehousesManufacturingAvg. NPVSavings / 1Million ofDecpreciableProperty 36,000 51,000 64,000 39,000 35,000 24,000 44,000 39,000 34,000 34,000(Figure 2)In Figure 2, you can see that often times, clientsuncover substantial positive net present value(NPV) real estate process through a CSS. Formany clients, the NPV savings generated by thestudy equals an amount large enough to makethe cost of the analysis a valuable investment.The Study & The Report:As specified by the IRS, cost segregationspecialists use an engineering-based approachfor both new and existing properties. Per the IRSCost Segregation Audit Techniques Guide (ATG),Chapter 4, the prime characteristic of a highquality cost segregation is “preparation by anindividual with expertise and experience”. Thisspecialist will examine the architectural/engineering drawings for potential assetreclassification and perform an on-site physicalinspection. Generally, a CSS should be conductedby an engineer with a construction background,experience in cost estimating andCost Segregation Studyallocation, and knowledge of the ever-changingtax laws and the strict IRS guidelines.Determining what property components qualifyfor a short depreciable life is based on assetspecific facts and circumstances. CSS specialistsalso rely heavily on standards existing in bothcase law and IRS guidance. Qualifications aremade based on the data collected fromconstruction and cost records, as well asinformation obtained from the on-site visit.A satisfying deliverable CSS report includes:-Preparer Information-Project Background Information-Cost Segregation Methodology-Asset Classification Summary-Federal Tax Classifications with Support-Project Related Services & FeesI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPER-Exhibit 1 – Federal Income Tax – MACRSlisting of assets and associated class lives-Exhibit 2 - PhotographsWhat types of items are identified?A large number of building components can beidentified and reclassified into shorterdepreciable life classes. These can include,electrical installations, mechanical components,plumbing, and finishes.Here are some examples of assets that mayqualify for faster depreciation:Case Study:Medical Office Building(Purchase Price: 5,000,000)Before Cost Segregation:5 Yr. Property – 07 Yr. Property – 015 Yr. Property – 039 Yr. Property - 5,000,0001st Year Depreciation Deduction - 128,205oLand ImprovementsoParking LotsAccelerated Cash Flows (Years 1-5) – N/AoFencesTotal NPV of Accelerated Cash Flow – N/AoData & Communication CablingoSecurity SystemsoCabinets & MillworkoOutdoor LightingAfter Cost Segregation:oLandscaping5 Yr. Property – 500,000oWall & Floor Coverings7 Yr. Property – 500,000oMoveable Wall PartitionsoWindow TreatmentsoElectrical and Plumbing (to certainequipment)Medical Office Building(Purchase Price: 5,000,000)15 Yr. Property – 500,00039 Yr. Property - 3,500,0001st Year Depreciation Deduction - 893,685Accelerated Cash Flows (Years 1-5) - 348,343Total NPV of Accelerated Cash Flow - 137,997Cost Segregation StudyI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERExamples of Cost Segregation Studies:Retail Shopping Center (5 Buildings)(Purchase Price - 17,000,000)Accelerated vs Straight Line DepreciationStraight Line DepreciationAccelerated 00200,000.00100,000.00-1 2 3 4 5 6 7 8 9 353637383940Cost Segregation StudyI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERThe following charts show the NPV Tax Savings after conducting a CSS on different types of properties:\\Cost Segregation StudyI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERConclusion:Over 90% of real estate investors are unintentionally overpaying federal income taxes and in addition tothat, they are paying federal income taxes earlier than necessary, simply by ignoring generous IRSguidelines when establishing depreciation schedules. Cost segregation provides immediate benefits toproperty owners and clearly provides great benefits. Are you a real-estate commercial property owner,investor or developer? You should consider taking advantage of a cost segregation study if you or yourcompany:-Acquired a property in the last 15 years-Are taxpayers with a commercial property having a depreciable basis of 750,000 or greater-Recently purchased, expanded, constructed or renovated a property-Lessees or lessors who have made leasehold improvements of 750,000 or greaterCost segregation is based on the fundamental principle, Time Value of Money (TVM), “a dollar today isworth more than a dollar tomorrow.” The same logic applies to the statement “a tax deduction today isworth more than a tax deduction tomorrow.” The bottom line is that cost segregation studies are one ofthe most valuable tax strategies available to real-estate commercial property owners, investors, anddevelopers. CSS is becoming more and more popular and it gives property owners the opportunity to defertaxes, reduce their overall current tax burden and free up capital by improving their current cash flow. Ifyou feel like you could benefit from a cost segregation study, talk to a qualified tax professional today soyou can start benefiting from cost segregation.About CSG Strategic Tax ConsultantsFounded in 1999, as a national provider of services geared towards assisting business owners with Research &Development Tax Credits, Cost Segregation Studies, 179D Energy Tax Deductions, 45L Energy Tax Credits, Fixed AssetDepreciation Review and additional tax strategies, CSG has steadily grown to take the worry out of navigating America’stax laws for the businesses we represent. In fact, we literally wrote the book on cost segregation for Commerce ClearingHouse, the world’s largest provider of tax content, called the ‘Practical Guide to Cost Segregation.’We know that keeping up with industry standards and ever-changing tax accounting practices can be a full-time job.That’s why our clients trust and rely on us to adeptly handle their tax-accounting needs. We’ll save you money while youtake care of your day-to-day operations and your own clients.CSG is a wholly-owned subsidiary of Wall, Einhorn & Chernitzer L.P. (WEC) a Norfolk, Virginia-based accounting firm.And, because we work alongside WEC, a firm that employs not only engineers but 80-plus CPAs and tax professionalswith an average of 20 years in the public practice; CSG will always have a breadth of expertise at our fingertips, everyday. We are dedicated to providing valuable solutions to our clients in a professional and timely matter.WEC is an independently owned and operated member firm of CPAmerica International, one of the largest associationsof CPA firms in the United States. Through our affiliation, we have instant access to the expertise and resources of morethan 2,500 professionals across America. As a client of our firm, you will benefit from the resources, experience andprofessional knowledge base of a national firm while still receiving the personalized service and attention that only alocally-owned, independent accounting firm can offer. Visit www.csgtax.com for more information.Cost Segregation StudyI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
Cost SegregationWHITE PAPERReferences:DiNardo, P., Baldwin, S. & Harris, C. (2010). Practical Guide to Cost Segregation (3rd ed.) ¶501.00.Chicago, IL: CCH a Wolters Kluwer businessJohnson, Bruce. (2016) Commercial Real Estate Development Association. Development Magazine: CostSegregation Is Just the Beginning. Retrieved December 30, 2016, aspxLeggett, Bradley, Giustiniano, Todd. (2015) Accelerated Cost Recovery Solutions [ACRS]. UnderstandingCost Segregation. Retrieved December 18, 2016, /Understanding Cost Segregation E guide2015.pdfJournal of Accountancy. (2004). Cost Segregation Applied. Retrieved December 29, 2016, 4/aug/costsegregationapplied.htmlMascarinas, Donna Mae, (2005) Cost Segregation and the Role of the Contractor. Retrieved December29, 2016 from icle(Cost Seg and Role ofContractor-JCAT-Jan Feb 2005).pdfCircular 230 Disclosure: This analysis is not tax advice and is not intended orwritten to be used, and cannot be used, for purposes of avoiding tax penaltiesthat may be imposed on any taxpayer.Cost Segregation StudyI C.Pearcy I Copyright CSG Strategic Tax Consultants, 2017 I All Rights Reserved
As specified by the IRS, cost segregation specialists use an engineering-based approach for both new and existing properties. Per the IRS Cost Segregation Audit Techniques Guide (ATG), Chapter 4, the prime characteristic of a high-quality cost segregation is “preparation by an individual with expertise and experience”. ThisFile Size: 1MBPage Count: 9
ST60 Depth instrument. Your ST60 Depth instrument provides depth information, plus maximum and minimum depth alarms. Switching on and off All the time that power is applied to the instrument, you can use the depth button to switch the instrument off and on as follows: † To switch the instrument off, hold down the depth button for approximately
depth buffer with the scene’s final depth values. Using this method, the rest of the scene can be rendered with depth test enabled and depth writes disabled. Note that it’s not necessary to render the entire scene in the Pre-Z pass as long as you keep track of what objects have been rendered to the depth buffer and
focus and correspondence depth estimates. The depth-maps are compared both qualitatively and quantitatively. A qualitative comparison of the two algorithms can be made by examining the resulting depth-maps. The algo-rithm implemented in this paper is able to create a depth-map with m
2. Using the SharkBite Depth and Deburr tool, deburr the tube ends and mark the PEX with the correct insertion depth. For 1/2" fittings, the pipe insertion depth is 15/16". For 3/4" fittings, the pipe insertion depth is 1-1/8". 3. Push the PEX into the fitting on the manifold until it reaches the depth mark. 4. The connection is now complete.
which contains four different architectures i.e., the multi-modal fusion (MM), multi-scale fusion (MS), global con-text aggregation (GA) and spatial information restoration (SR) cells. 3.2. Depth Sensitive Attention We propose a depth-sensitive RGB feature modeling scheme, including the depth decomposition and the depth-sensitive attention module.
composing fragments in depth order. Depth peeling [Everitt01] [Mammen84] is a robust image-based solution to this problem which captures one layer of fragments each time the geometry is rendered (geometry pass). Besides order-independent transparency, depth peeling is useful for generating layered depth images and tracing bundles of rays. The major
network, which refines the surface normal from the given depth map. Then we explain the normal-to-depth network to update depth from the given surface normal map. It is followed by the overall architecture of our GeoNet, which utilizes these new modules. 3.1. Depth-to-Normal Network As aforementioned, learning geometrically consistent sur-
STA 18 LTX 100 HO 18 LTX 20-82 CORDLESS VACUUM SET AS 18L PC Cutting depth wood : 100 mm Cutting depth NF metal : 25 mm Cutting depth sheet steel : 10 mm Planing width : 82 mm Adjustable planing depth: 0 - 2 mm Maximum notch depth : 9 mm Air output max.: 2100 l/min Vacuum: 120 hPa(mbar) Container volume: 7.5 l CORDLESS SABRE SAW
